(Reuters) – PepsiCo Inc’s (PEP.O) quarterly revenue and profit beat Wall Street estimates on Tuesday, boosted by higher sales of its traditional Pepsi soda as well as snacks Lay’s and Dorito chips.
FILE PHOTO: Bottles of Pepsi are pictured at a grocery store in Pasadena, California, U.S., July 11, 2017. REUTERS/Mario Anzuoni/File Photo
Beverage sales rose in the quarter as the company’s packaging strategy to move away from large cans of sugary drinks to smaller ones that have higher margins is helping it add consumers who occasionally like to ‘indulge’ even while preferring healthier options in the long term.
“Core Pepsi is what is driving the improved performance in soda,” Chief Financial Officer Hugh Johnston told Reuters.
“You have the consumer shifting from bigger volume packages into packages that are smaller… but the price realization is quite good on them,” Johnston said.
Earlier this year, PepsiCo launched berry, lime and mango flavored sodas in 12-ounce cans and introduced variations of Cheetos and Doritos tortilla chips.
Rival Coca-Cola Co (KO.N) also saw a rise in overall sales in its last quarter, boosted by strong demand for its orange-vanilla cola, its first such launch since 2007 when it introduced vanilla Coke.
Both Pepsi and Coca Cola have also been offering new products to cater to consumers who prefer healthier options like sparkling waters and teas.
Chief Executive Officer Ramon Laguarta said the company would even launch mini and large cans of its Bubly sparkling water in new fruity flavors.
“I think this is going to be a long-term consumer trend. Consumers are looking for smaller portion packs,” Laguarta said in a conference call with analysts.
Beverage volume fell 2% at PepsiCo’s North America beverage unit, largely due to higher sales of smaller packages of sodas and juices, but revenue from the business rose 2.5%.
Revenue in its snacking division, Frito-Lay North America, rose 4.5%, led by high single-digit growth in convenience and dollar stores, pushing total net revenue up 2.2% to $16.45 billion.
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Organic revenue, which excludes the effect of currency fluctuations and acquisitions, increased 4.5% in the quarter. Three analysts polled by Refinitv IBES had expected a 4.87% growth in organic revenue.
Net income attributable to the company rose 11.8% to $2.04 billion from $1.82 billion a year earlier.
Excluding one-time items, it earned $1.54 per share. Analysts on average had expected profit of $1.50 per share and revenue of $16.43 billion.
Shares of the company, which were up about a percent, fell marginally in morning trading.
Reporting by Nivedita Balu in Bengaluru; Editing by Sriraj Kalluvila and Arun Koyyur